EOQ-Based Raw Material Inventory Optimization for Cost Efficiency in Cabinet Production at CV. Sultan Khinara Jaya

Abstract

This study investigates raw material inventory control in the cabinet production process at CV. Sultan Khinara Jaya, with the objective of minimizing total inventory costs. The primary problem identified is inventory imbalance, which creates risks of both overstock and stock shortages. A quantitative descriptive approach is employed, utilizing the Economic Order Quantity (EOQ), safety stock, and reorder point (ROP) methods to determine optimal order quantities and reorder timing. Data were derived from annual raw material demand, ordering costs, holding costs, and procurement lead times. The findings reveal that optimal order quantities and ordering frequencies vary across raw material types according to their respective demand levels and storage cost structures. The application of the EOQ method yields a reduction in total inventory costs for all raw material categories, with cost savings ranging from IDR 417,234 to IDR 2,498,474 per material compared to the company’s conventional approach. Notably, mahogany wood blocks achieve the highest absolute savings, while teak wood boards demonstrate consistent efficiency gains despite higher demand variability. This study makes two principal contributions. Theoretically, it extends the application of the EOQ model to a small-scale furniture manufacturing context—a setting where raw material heterogeneity and demand fluctuations are often overlooked in prior research. Practically, it provides an implementable inventory control framework comprising EOQ, safety stock, and ROP that enables the firm to reduce holding costs, prevent stockouts, and enhance production continuity. These results affirm that the EOQ method is superior to conventional practices in balancing ordering and holding costs, thereby supporting operational efficiency and sustainable production.